Professional indemnity insurance: top three tips for your 2022 renewal
Edward Partridge, SVP at Marsh Commercial, shares his thoughts on the most important things to consider when renewing your professional indemnity insurance
In recent years, we’ve seen the professional indemnity (PI) insurance market begin to change. After more than a decade of soft market conditions, the accountancy PI market has hardened.
Insurance markets cycle from hard to soft, which in turn impacts commercial businesses in different ways. In a soft market, there is more competition between insurers for the same risk. Insurers will try to increase their market share by adopting an aggressive pricing approach and offering enhanced policy coverages. Supply outweighs demand, driving premiums down and resulting in a buyer’s market.
In a hard market, insurers have less desire to grow and will be evaluating their book of business, appetite for risk and presence in the marketplace. Supply falls short of demand pushing premiums up – and businesses are often subject to stricter standards or policy terms.
The market has been hardening as a result of a number of global issues. The Lloyd’s Thematic Review of 2020 was a strong influence of some of the changes we’re seeing today. Lloyd’s of London is an insurance and reinsurance market located in London. Its network of insurance brokers, underwriters and agents is the largest in the world.[1] Lloyd’s established that some members of their network were not charging enough premium to cover claims. In fact, this was a result of the insurance market softening too much. Lloyd’s mandated that its members needed to increase premiums to charge a sensible and economically sound premium otherwise it would not renew its capacity to trade in the Lloyd’s market. This caused a ripple effect across the market, with even insurers outside Lloyd’s market reviewing their premiums and adjusting accordingly.
Currently, fewer insurers are prepared to offer accountancy PI. This has resulted in reduced capacity in the market, limited policy coverage and those insurers still operating in the market becoming selective about who and what they choose to insure. No matter how long you’ve been purchasing PI cover, our advice is that you prepare yourself for what you might experience at your renewal.
1. Choose a leading professional indemnity insurance broker
Your broker’s strong insurer relationships are vital in securing the cover you need at the best possible price. With all the changes occurring in the PI market, it’s never been more important to work with a specialist PI insurance broker for accountants.
Your broker is there to provide advice and clearly explain the extent of your insurance cover. They act on your behalf and have a legal duty of care in the advice and products they recommend. Using a broker will help you avoid duplication of cover and paying twice, as well as making sure you’re not over or under-insured.
2. Start preparing for your renewal early
In a hard market, you cannot afford to wait until the last minute if you want to secure the best cover at the best price. Be sure to engage in your renewal as early as possible. This will give you plenty of time to gather any documentation required by your broker. Insurers will likely have questions about your business operations so you need to factor in time to respond.
3. Be prepared to provide more detailed information than usual
Insurers are likely to ask for more detailed information about your business operations, supply chain processes and current risk-management methods. Requests like this significantly impact the amount of time it takes to generate renewal terms. Be prepared, and engage with your broker early.
Marsh Commercial is the exclusive insurance broker for ICAS member firms under the Evolve practice support programme. A specialist PI insurance broker for professionals, Marsh Commercial offers a full range of insurance solutions. Contact the team to ensure you have the protection you need to carry out your work with confidence.
For more information on the PI insurance market, or your PI renewal, contact the team at Marsh Commercial on 0330 175 5876 or by email.
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